Frank Jotzo

Poll 66

Top economists say Trump’s policies will hit Australian economic growth and push up inflation and interest rates in the US.

Weaker US economic growth; Weaker Chinese economic growth; Weaker Australian economic growth; Slower progress towards global net zero emissions

The main concerns about America under Trump are not economic. The really big worries are about the future of democracy in America, about security and geopolitics, and about social and humanitarian damage that will be done. The economic effects will be regrettable. If implemented, the US policy measures will hurt the US economy. They'll also slow growth elsewhere, through trade and possible emulation of isolationist policies. Climate change efforts will obviously be set back in the USA, and there will be a chilling effect on climate policy action globally. But the effect might not be as great as one might think. In the US as elsewhere, clean energy transition is underway regardless of federal policy, and government support for emerging green industries will be difficult to remove. A number of US States will pick up some of the policy slack. In other countries, governments that are against climate action will find Trump a convenient excuse. Others will fill the international leadership gap and strive to seize clean economy opportunities. That can include Australia.

Poll 65

Panellists are unanimous in believing Australia’s housing market is in crisis.

Offered a choice of 14 measures identified by the Economic Society of Australia as likely to restrain prices for buyers and renters, none of the 49 leading economists polled picked: “do nothing, the market will determine appropriate prices”.

Unaffordable housing in Australia is largely a supply-side issue. We have population growth and high incomes, yet housing supply is slow to grow. Restricting immigration seems politically popular when framed in the context of housing and infrastructure, but it would backfire economically.

Rental Affordability

Remove barriers to building prefabricated homes, Ease planning restrictions, Replace stamp duty with a broadly based land tax that includes the family homes, Fast-track training of home builders, Provide more public housing, Fast-track immigration of home-builders

Poll 64

Panelists were asked to comment on two questions: 

Is the budget likely to achieve its aim of getting inflation back within the RBA target band by the end of this year and back to 2.75% by mid next year?

And

On May 14, the government delivered a budget designed, in the Treasurer's words, to "focus on fighting inflation in the near term and then growth in the medium term " - What grade would you give the budget, given that objective? A, B, C, D, E or F

Wes Mountain/The Conversation, CC BY-ND https://creativecommons.org/licenses/by-nd/4.0/

NOT SURE

C

It's not all about inflation. There are opportunities (not taken) for fiscal and other reforms to boost productivity, address deepening unequal income distribution and increase revenue while addressing externalities. Reducing or eliminating negative gearing and fringe benefit tax exemptions, increasing welfare payment rates, and ending the fuel excise exemption in agriculture and mining come to mind. Such opportunities are habitually missed in federal budgets.

Poll 63

April Poll - panellists were asked about the GST deal with Western Australia.  The following two questions were posed: 

"Is the long-standing arrangement broadly the best method of distributing the nationally-collected GST revenue?" and "Should the 2018 changes be kept or scrapped?"

YES - The principle of fiscal equalisation is an important element of the Federation. Distributing the GST in line with fiscal equalisation principles makes sense.

Scrapped

The WA deal goes against fiscal equalisation principles.

Poll 62

Panellists were asked "Which of the options set out below best describes the kind of approach the Australian government should take to the US Inflation Reduction Act? (Pick 1)"

.

Green industry policy needs to be carefully calibrated to realise Australia?s comparative advantage in renewable energy and clean resource processing, not to pursue visions of new manufacturing industries. And it needs to deliver financial returns back to the nation, not just prop up company profits. The US green industry policy is not a good model for Australia. Lump sum tax credits as per the Inflation Reduction Act will waste taxpayers? money. And keep in mind that the US produces largely for the domestic market, so the subsidies benefit American consumers through lower prices. Australian production subsidies will tend to benefit shareholders and consumers worldwide. Government support should take the form of selected early-stage support that gives a financial upside to taxpayers. That could be government taking equity positions in new zero-emissions industries. If it has to be subsidies, then they are best given by concessional finance or underwriting market price risk. Any subsidies should be awarded in competitive tenders, as is common now for renewable energy. In any case, future profits need to be properly taxed. Government also needs to be clear about the objectives for giving any subsidies. Providing support for emerging industries that are likely to develop a cost advantage over time is a strong case. Handing out money to existing industries that can no longer compete in international markets, like nickel mining and processing, is not. Australia can and surely will make a big contribution to global decarbonisation, by exporting clean fuels and commodities produced using renewable energy. But we need to be conscious also of the local costs inherent in large-scale industries, from local environmental impacts and effects on indigenous rights and values, to extra pressure on the supply chains that are needed to decarbonize the domestic power supply. Industry policy needs to be done in ways that benefit Australian society long term. Setting it up for solid future revenue flows to the government is the key.

Poll 61

Worried economists call for a carbon price, a tax on coal exports, and ‘green tariffs’ to get Australia on the path to net zero

Introduce an economy-wide cap and trade carbon pricE | Expedite building new transmission lines to connect renewable energy

Achieving net zero emissions requires a far broader range of actions than the list of pre-set options here suggests as possibilities. For net zero, policy action is needed in each greenhouse emitting sector, using a range of targeted policy instruments in addition to broad-based carbon pricing where that is feasible administratively and politically. A more complete list would comprise many dozens of actions across electricity supply, electrification and energy efficiency in transport, industry and residential sector, public transport, infrastructure investment, embodied emissions in buildings and infrastructure, technology improvement and product shift in agriculture, reforestation and afforestation, and much more. A full list would also and importantly include targeted measures to support carbon dioxide uptake from the atmosphere, compensating for remaining emissions ("net" zero is what we are aiming for, not zero), as well as measures to help cut Australia's international emissions footprint as an energy exporter by encouraging the shift from coal and gas to zero-emissions fuel exports and exports of 'green' commodities. The net zero sector plans that are being developed by the government offer a chance to take stock of what emissions reduction trajectories may be possible, what actions can and should be taken by industry, households and government, and what policy interventions can best support them. It's to be hoped that this Net Zero Plan process will be extensive in its consideration of options and scenarios, and inclusive in its engagement with industry, civil society and the research sector.

Poll 60

Australia’s leading economists believe Australia can sustain an unemployment rate as low as 3.75% – much lower than the latest Reserve Bank estimate of 4.25% and the Treasury’s latest estimate of 4.5%.

relaxing industrial relations regulation to allow for greater "flexibility" (as defined by employers), reducing out-of-pocket costs of childcare for families

3.5

Poll 59

Our panellists were asked the following 2023 budget question: "On May 9, the government delivered a budget designed, in the Treasurer's words, to strike a balance between relief, repair and restraint'.  What grade would you give the budget, given that objective: A, B, C, D, E or F?"

Wes Mountain/The Conversation, CC BY-ND - https://creativecommons.org/licenses/by-nd/4.0/

Overall rating: B - Keeping inflationary pressures in check: B

B

OVERALL COMMENTS: It's a sensible budget. Less timidity on social support, subsidies for energy efficiency and gas taxation would have made it better. INFLATION COMMENTS: It is not an expansionary budget, any effects on inflation will be small in context. Some of the budget measures provide some help to those who bear the brunt of inflation.

Poll 58

When panellests were asked to find an extra A$20 billion per year to fund government priorities like building nuclear submarines and responding to climate change, Australia’s top economists overwhelmingly back land tax, increased resource taxes, an attack on negative gearing and extending the scope of the goods and services tax.

Photo credit by Joshua Hoehne on Unsplash

Efficiency picks: Tax windfall profits Introduce or increase land taxes (possibly with cut in stamp duty) Wind back deductions for negatively geared properties Equity picks: Wind back deductions for negatively geared properties Tax windfall profits Wind back superannuation tax concessions

Efficiency comments: There are many ways to raise more tax revenue efficiently, especially by cutting tax concessions; resource taxation also has big gaps. Not on the list here is an important unused option: carbon pricing that raises revenue. If Australia fully taxed emissions at $100/tCO2-equivalent then the revenue would be around $15 billion per year from electricity, $18b per year from industry and stationary industry, and $9 billion per year from transport. Reference points: EU emissions trading now nearly $150/t with auctioning revenue greater than 30b euros per year; Australia's planned maximum price in the safeguard mechanism is $75 per tonne, but there is no plan to create any fiscal revenue. Equity comments: Many of Australia's tax concessions predominantly benefit high income earners and/or relatively wealthy people. In the interest of equity and also efficiency they should be reduced or eliminated.